Sort out your problems to save your currency, British PM urges eurozone leaders
Published 10/11/2011 | 13:42
EUROZONE leaders and the European Central Bank (ECB) must act without delay to save their currency, British Prime Minister David Cameron said today.
Mr Cameron was speaking as the crisis in the single currency area came to a head, with Italy attempting to sell five billion euros-worth of one-year bonds to service its debts.
The sale comes a day after yields on 10-year Italian bonds hit a euro-era high of 7.25pc, raising severe doubts over the sustainability of Rome's financial position.
Labour leader Ed Miliband called today for an emergency meeting of the European Council to be called for this weekend to thrash out a lasting solution to the problems.
The meeting should not be allowed to break up or the leaders to go home until the crisis is resolved, said Mr Miliband.
In a speech in London, Mr Cameron said: "If the leaders of the eurozone want to save their currency, they and the eurozone institutions must act now together, because the longer they delay, the greater the danger."
Mr Cameron told his business audience that it was "a very alarming time for the world economy".
"Our economy faces new difficulties, people are desperately worried about their jobs," said the Prime Minister.
"Businesses are feeling the strain. We have got to make sure we come safely through the storm."
Amid speculation about a possible break-up of the euro or intervention by the ECB as a "bank of last resort", Mr Cameron said the Government was "preparing for every eventuality".
European Commission President Jose Manuel Barroso last night issued a new call for the EU to "unite or face irrelevance" in the face of the mounting economic crisis in Italy.
In a speech in Berlin, Mr Barroso said the world was facing fundamental changes to the economic order and European countries had to stand together.
"The challenge is how to further deepen euro-area integration without creating divisions with those who are not yet in it. The world needs a stronger Europe: more Europe, not less," he said.
Mr Miliband today said that Europe was in "a very serious moment", with Greece unable to announce a new government and the long-feared contagion becoming a reality in Italy.
And he accused Mr Cameron of "leaving Britain adrift and at the mercy of the biggest economic crisis of our lifetime".
"He has chosen to lecture from the sidelines, not only out of touch but dangerously complacent as the crisis threatens the jobs of thousands," said Mr Miliband.
"His refusal to take a lead is an abdication of responsibility. He must act today."
Mr Miliband said that Europe needs three things urgently: strong governments in place in Rome and Athens immediately; an end to "prevarication" over the ECB's role as lender of last resort and the creation of an effective bailout fund to act as a firewall to contagion; and a plan for growth.
He added: "We can't wait any longer for these three steps.
"We need an immediate European Council this weekend. The UK Government should demand one.
"That meeting must not be allowed to break up until a comprehensive solution has been put in place for the crisis."
Mr Barroso said the EU was facing a "defining moment" and called on "responsible leaders" to go out and make the case for Europe.
"Populism and sometimes even nationalism raises its head across our continent, claiming that too much Europe is the cause of our current difficulties; claiming that less Europe, or even non-Europe, would bring solutions," he said.
"This is ignoring the global realities as well as our common history that teaches us that this continent is simply too small and too inter-dependent for us to stand apart, to turn our backs to each other."
If the euro area of the 17 single currency member states, or the entire 27-country EU, broke apart, he said, the estimated initial cost was up to 50pc of EU GDP, with ongoing threats to the prosperity of the next generation.
"We must show our citizens what is at stake. We must choose the path of strength over weakness. Unity over fragmentation. The hard choice over the easy one," he said.
Italy endured another pounding on the international markets amid fears that prime minister Silvio Berlusconi would attempt to hang on to office and delay essential economic reforms.
In Greece, MPs finally came up with a deal to create an interim government to pass the country's new debt deal, but there was no confirmation on who will succeed outgoing prime minister George Papandreou.
Mr Berlusconi has pledged to resign after the Italian parliament passes the financial reforms that European officials have been demanding for months.
The process can take up to two weeks, but president Giorgio Napolitano said that would be accelerated to days, allowing him to quickly begin talks on forming a new government or calling new elections.
"Fears are totally unfounded that Italy may experience a long period of inactivity," Mr Napolitano said, adding that "emergency measures" could be adopted at any time.
With debts of €1.9 trillion, Italy is considered too big for Europe to bail out. Higher borrowing rates will make it more difficult and expensive for Italy to roll over its debts.
The ECB has been buying up Italian bonds to keep yields at reasonable rates, but critics say that is throwing good money after bad.
Any delays in the financial reforms or in establishing a new, stable Italian government frighten the markets, which are already unnerved since some investors in Greece are going to lose 50pc of their holdings.
Answering questions following his speech, Mr Cameron said: "It is not in our interests for the eurozone to break up - for countries to leave the eurozone.
"We have to keep the British economy safe, to take the British economy through this storm. That means preparing for all eventualities."
Downing Street declined to discuss reports - denied in both Paris and Berlin - that France and Germany were discussing an overhaul of the single currency that would lead to a more closely integrated eurozone with fewer member-states.
The Reuters news agency quoted an unnamed "senior EU official in Brussels" as saying: "France and Germany have had intense consultations on this issue over the last months, at all levels.
"We need to move very cautiously, but the truth is that we need to establish exactly the list of those who don't want to be part of the club and those who simply cannot be part."
But a French finance ministry spokesman denied the report, saying: "There have been no conversations between French and German authorities at any level on decreasing the size of the eurozone."
Asked for the Prime Minister's response to the report, Mr Cameron's official spokesman told a daily Westminster briefing: "You have got a very clear unambiguous statement from the French foreign ministry and the German chancellor's spokesman denying that conversations are happening."
He added: "What we want to see is an end to the debt crisis. Eurozone countries agreed a package at the end of October and we want to see that package implemented."